how to get nguyen kim back to leaderin technical consumer goodsmarket in 2016 2018

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MMCoM9 NGUYEN THI NGOC LAN PHAM HUU LOC HOW TO GET NGUYEN KIM BACK TO LE

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES

SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT

MMCoM9

NGUYEN THI NGOC LAN PHAM HUU LOC

HOW TO GET NGUYEN KIM BACK TO

LEADER IN TECHNICAL CONSUMER

GOODS MARKET IN 2016-2018

MASTER FINAL PROJECT

MASTER IN MARKETING AND COMMUNICATION MANAGEMENT

Ho Chi Minh City (2016)

LETTER OF RECOMMENDATION

We are writing to confirm that the project entitled:

HOW TO GET NGUYEN KIM BACK TO LEADER IN TECHNICAL CONSUMER GOODS MARKET IN 2016-2018

Which was prepared by Ms Nguyen Thi Ngoc Lan and Mr Pham Huu Loc has satisfied requirements for a Master project in Marketing and Communication Management They are now qualified to present it to the Jury

Yours sincerely,

Academic Tutor, Assoc Prof Hoang Thi Phuong Thao (Ph D)

Practical Tutor, Nguyen Le Thai Hoa (MMA)

TABLE OF CONTENT

COMMITMENTS 3

ACKNOWLEDGEMENTS 4

CHAPTER 1: INTRODUCTION 11

1.1 Vietnam Retail Market Overview: 11

1.2 Vietnam Consumer Electronics Market: 13

1.3 Nguyen Kim introduction: 15

1.3.1 History: 15

1.3.2 Nguyen Kim’s Vision - Mission – Objectives: 16

1.3.3 Nguyen Kim’s Marketing Activities 16

1.4 Problem statement and Rationales: 17

1.5 Project objectives: 18

1.6 Scope and limitation of the project: 18

1.7 Methodology: 19

1.8 Structure of the project: 19

CHAPTER 2: LITERATURE REVIEW 21

2.1 Introduction: 21

2.2 Brand nature and scope 21

2.2.1 Brand definition 21

2.2.2 Scope of the brand: 22

2.3 Retailer format: 22

2.4 Store image: 22

2.4.1 Some definitions: 22

2.4.2 Store image dimension: 23

2.4.2.1 Commercial/marketing image of store: 23

2.4.2.2 Social image of the store 24

2.4.2.3 Strategic image of the store 25

2.4.2.4 Store personality 25

2.5 Store Satisfaction 25

2.6 Store loyalty 25

2.7 The relationship between store image, store satisfaction, and store loyalty 26

2.8 SWOT analysis: 27

2.9 Marketing strategy: 27

2.10 Chapter summary 27

CHAPTER 3: CRITICAL ANALYSIS 29

3.1 General analysis: 29

3.1.1 Macro environmental Analysis (SLEPT) 29

3.1.2 Micro environment: 31

3.1.2.1 Competitors: 31

3.1.2.2 Customer segmentation: 33

3.1.2.3 Supplier analysis: 34

3.1.2.3.1 Power of suppliers: 34

3.1.2.3.2 Power of Nguyen Kim: 34

3.2 Evaluation of Nguyen Kim’s Marketing Activities: 35

3.3 SWOT analysis: 37

3.3.1 Strengths: 37

3.3.2 Weaknesses: 37

3.3.3 Threats: 38

3.3.4 Opportunities: 38

CHAPTER 4: RECOMMENDATIONS AND ACTION PLAN 39

4.1 Nguyen Kim’s business goals in the next 5 years: 39

4.2 Marketing objectives: 39

4.3 Recommendations to improve Nguyen Kim customers’ satisfaction and loyalty 39

4.3.1 Recommendations for improving Nguyen Kim’s commercial image according to marketing mix (4Ps): 40

4.3.2 Nguyen Kim Social image: A good citizen for community 40

4.3.3 New strategy for approaching customers (strategic image): 41

4.3.4 Building Nguyen Kim personality: The Protector 42

4.3.5 Moving from traditional to digital in Marketing: 43

4.4 Integrated marketing and communication plan with timelines: 43

4.5 Marketing Budget allocation in 2016-2018: 46

4.6 Conclusions: 46

REFERENCES

APPENDIX

APPENDIX A:

APPENDIX B:

APPENDIX C:

APPENDIX D:

APPENDIX E:

LIST OF ABBREVIATIONS

PH: Photography

IT: Information Technology

OE: Office Equipment and Consumables

M&A: Mergers and Acquisitions

BMI: Business Monitor International

CCI: Consumer Confidence Index

VCCI: Vietnam chamber of commerce and industry

ABSTRACT

Established since 1996, Nguyen Kim is very successful in Ho Chi Minh City (Vietnam) as a market leader in Technical Consumer Goods (TCG), especially in Consumer Electronic (CE), Major Domestic Appliance (MDA) and Small Domestic Appliance (SDA) sector Nguyen Kim is the first and the only store selling genuine products with the clear price listed, applying “free delivery and installation at home” service policy, the pioneer in service and bringing more benefits to customers For years, Nguyen Kim has had 21 shopping centers in big cities throughout the country and became the leader in market share, service and revenue in Vietnam TCG retail market In 2015, Central Group (Thailand) acquired 49% stakes owned by Nguyen Kim

However, during from 2011 to 2013, TCG retail market witnessed significant decrease in sales due to economic downturn Vietnam Consumer Confidence Index fell gradually There was a sign of market saturation in the urban of Vietnam While some sectors that Nguyen Kim was evaluated as its strengths including CE, MDA, SDA that maintained low growth rate, telecommunication sector rose dramatically average 35% per year This created an opportunity for The Gioi Di Dong (Mobile World Investment Corporation-MWG), to develop since telecommunication was its major business Moreover, there was an aggressive penetration of internal and external competitors in Vietnam TCG market during recent years In terms of pricing competition, most major retailers are trying to offer the most competitive discounts

to attract customers and increase sales Nguyen Kim had many difficulties to maintain and increase its sales, market share and even brand awareness In 2015, Nguyen Kim officially lost its leading position for The Gioi Di Dong, the biggest competitor in sales and market share

The purpose of this paper, therefore, is to study the opportunity for Nguyen Kim getting back to the leader in TCG retail market In order to do that, it is essential for undertaking many researches to know what factors are most important for customers purchasing decision, how to attract them effectively and how to maintain their loyalty Relevant desk researches and secondary researches have been used for the analysis

to evaluate Nguyen Kim integrated marketing and communication activities in the last three years A qualitative method was also done with two focus group discussion

to identify some factors contributing store image leading to store loyalty Results revealed that store image influenced positively on purchasing decision Beyond conventional marketing image of a store, corporate social responsibility gradually became more important in determining purchasing decisions The findings will help retail management and Nguyen Kim in particular to understand customers’ insight,

to segment effectively, and to reposition their store image accordingly

CHAPTER 1: INTRODUCTION

The purpose of chapter 1 is to provide understanding for Vietnam’s retail market overview, especially in Technical Consumer Goods market, how it is potential for international and internal investors, and Nguyen Kim’s introduction in this context

1.1 Vietnam Retail Market Overview:

Vietnam is one of the most potential retail markets in the world In 2014, Vietnam was ranked 28th in Top 30thpotential markets in the world However, Vietnam retail market maintained the highest growth rate by 23% comparing to India (18,8%) and China (13%) Furthermore, the market scale reached to USD110 billion in 2014 and had high average growth rate by 15% every year from 2004

On the other hand, Vietnam has approximately 100 million people, two-third of Vietnam population is young and in the working age Vietnam’s population increased about 1 million people per year that lead to the rising of Vietnam retail market scale Young population is core shopper in the market so that push Vietnam retailing development in the future

According to CBRE’s report “The Liveliness of Retail Markets in Asia – Pacific 2014”, Vietnam is one of potential and highly-evaluated markets in the region Modern trade included supermarket, hypermarket, shopping mall, convenience store, online shopping and TV shopping are dominant It took by 25% in the market which

is projected increase by 45% in 2020 In VCCI research, 37,4% people said that usually shopping in supermarket and shopping mall instead traditional market Asia is getting richer and Vietnam is part of this story In Nielsen’s 2015 report “Are you ready for the future”, Asia will be home of 3 billion middle class and Vietnam middle class set to almost triple by 2020 from 12 million to 33 million (2014 to 2020)

By 2020, Vietnam’s average per capita income will rise from $1,400 to $3,400 a year Vietnam’s GDP accounted 7 percent in the fourth quarter of 2015 over the same quarter of the previous year Bloomberg’s analysis on the growth prospects of 93 economies in the world forecasted that Vietnam will rank second worldwide for growth rate in 2016, with 6,6 percent, just behind India with 7,4 percent

Top 3 big cities of population in Vietnam are Ho Chi Minh City 7,955 million, Hanoi 7,067 million and Thanh Hoa 3,491 million The Vietnam’s urbanization accounted for 3,3% per year with 33, 1% of population living in big cities

Therefore, foreign retailers as well as local retailers make their efforts to expand their coverage in Vietnam There were various forms of expansion such as open new stores and merge and acquisition

For example, in February 2016, Thai Charoen Corporation (TCC Group-Thailand) has acquired Big C Thailand with the price of 3, 5 billion USD and many have said that TCC will acquire Big C Vietnam with the price of 900 million USD Before,

TCC also acquired Metro Vietnam, largest M&A deal ever, with the price of 655 million euro

In 2015, Aeon acquired stakes of 30 percent in Fivimart, increasing their local retailer

up to 20 stores in Hanoi, 49 percent in Citimart with 27 stores in Ho Chi Minh City Central Group (Thailand) entered Vietnam retail market with two Robins stores in

Ho Chi Minh City and Hanoi, a range of shops of SuperSports, Crocs and New Balance brands, Britain’s Marks and Spencer fashion stores Central Group owns a

49 percent stake in Nguyen Kim Trading JSC, which is the biggest consumer electronics store chains in Vietnam

AuchanSuper planned to invest 500 million USD in Vietnam and co-operate with C.T Group (South Vietnam) and MIPEC (North Vietnam) to boost enter the market in the next 10 years AuchanSuper become the only French retail chain in Vietnam after Metro and Big C are selling themselves to Thailand partners

Lotte (the number one retailer in Korea) set a target of 60 supermarkets while Aeon (Japan’s giant retailer) has built 4 hypermarkets and announced that it will open 200 shopping destination in Vietnam in 2020

Saigon Co.op currently has 80 Co.op Mart, 2 supermarket Co.op X-tra, SC Vivo City,

96 Co.op Food stores and nearly 200 Co.op stores Vingroup has 20 Vinmart centers,

200 convenience store VinMart+ Vingroup also acquired Maximart and Vinatex chains Revenue of retail of Vingroup in 2015 reached 4200 billion VND for just one year of development

Vietnam’s Ministry of Industry and Trade projected the Vietnam retail industry growth at 20-21% from 2016-2020 There will have approximately 1.300 supermarkets, 180 shopping malls in 2020 Modern retail’s revenue is 617, 5 thousands of billion VND

In 2015, merges and acquisitions in Vietnam grew 9,7 percent to touch USD5,2 billion across deals, according to Stoxplus Real estate, industrial goods and services, and retail were the most favored sectors for overseas investors

Middle class is rising in Asia and Vietnam is the part of this trend They tend to spend more and create a wave of demand for high-end products 43% Asians are willing to pay for innovative products and breakthrough their purchase decision will depend on the characteristics of products including quality, level of safety, new technology application

Online is thriving and the momentum is forecasted to be led by Asia Consumable goods maintain consistent browse/buy rate with 40%/48% in airline ticket and reservation, 43%/34% in electronic equipment, 40%/33% in mobile phone E-Commerce accounted to 1, 8 trillion USD, taking 6, 8% to total retail sales of worldwide, increasing 18% comparing 2015 vs 2014 Millennial (age 21-34) are the core shoppers with 49-59% of customers will browse online when they have demand and 52-64% decide to buy online

1.2 Vietnam Consumer Electronics Market:

The Technical Consumer Goods (TCG) market in Vietnam in 2015 reached to USD6,

3 billion Vietnam is only country in Southeast Asia ranked in Top 5 major strongest growth market over the world last year Daily market revenue accounted for VND370 billion

Business Monitor International (BMI) forecasted Vietnam Consumer Electronic Market can reach USD10, 8 billion in 2017 with the dominance of telecommunication devices, accounted for half of market

Chart 1.1 – GFK TEMAX VIETNAM for the fourth quarter of 2015

The Technical Consumer Goods market in Vietnam grew strongly in the fourth quarter of 2015 comparing to the same quarter of 2014 As can be seen from the chart,

it is in the upward trend, significantly increase in sale volume from VND20, 8 trillion

in Q4/2012 to VND39,27 trillion in Q4/2015

Chart1.2 – Spending by consumers in seven sectors

Looking at each category of Technical Consumer Goods, spending by consumers in five of the seven sectors – Telecommunications (TC), Consumer Electronics (CE), Major Domestic Appliances (MDA), Small Domestic Appliances (SDA), and Photography (PH) increased Except for the Information Technology (IT) and Office Equipment and Consumables (OE) which both accounted a decline, all the rest helped

to drive the 24.1% growth in sales generated in Q4 2015, compared to Q4 2014 There are many key players sharing this market In the North of Vietnam,Pico, Tran Anh, Media Mart is key players while Cho Lon, Thien Hoa sharing the market in South Nguyen Kim and The Gioi Di Dong/Dien May Xanh have a wide coverage over the country

Pico is one of the biggest retailers in the North and its brand familiar with the majority

of population not only in Hanoi In early 2016, the fifth Pico shopping center was opened at 240 Ton Duc Thang (Dong Da Ward, Hanoi) with 2.500 square meter It is part of Pico expansion strategy in 2016, increasing the number of store by 5 in Hanoi and 6 another stores in other provinces Pico was ranked in Top 500 Retail Companies

in Asia-Pacific and Top 10 leading retailers in Vietnam from 2011, ranking by The Retail Business Magazine, Retail Asia and Euro Monitor Market Research Group Tran Anh Digital World Joint Stock Company was established in 2002 December 12

2013, Nojima – one of Japan’s leading consumer electronics retailer enter Vietnam market after acquiring 10% of Tran Anh In June 2015, Nojima increased their ownership to 30, 91% Tran Anh announced to their expansion strategy in 2016 with set foot in South of Vietnam with Ho Chi Minh City, the biggest potential market Entering the consumer electronics market since January 16 2008, up to now, Media Mart covered the North Vietnam market by many shopping center at Hanoi and 10 provinces behind such as Phu Tho, Quảng Ninh, Bắc Giang, Nam Định, Vĩnh Phúc, Thanh Hóa, Hưng Yên, Bắc Ninh, Thái Nguyên and Hải Phòng

Establishing in 2001 with main sector are consumer electronic and furniture, Thien Hoa has been known as big retailer with 7 shopping center in Ho Chi Minh City, 1 in Binh Duong, 1 e-Commerce shopping center and 8 after-sale service center

Cho Lon entered the market in 2001, up to now, Cho Lon has 31 subsidiaries over the South of Vietnam, included 14 stores in Ho Chi Minh and provinces around the big city such as Tay Ninh, Dong Nai, Long An and Binh Duong 14 stores in many provinces of Mekong Delta such as Bac Lieu, An Giang (Long Xuyên), Vinh Long,

Ca Mau, Can Tho, Ben Tre, Kien Giang, Tra Vinh, Dong Thap (Cao Lanh, Sa Dec), Soc Trang, Hau Giang 06 stores in Da Nang, Khanh Hoa (Nha Trang), Binh Thuan (Phan Thiet), Lam Dong (Bao Loc)

End of 2015, MWG registered significant increase by 60 percent over the year of

2014, reached VND25, 250 billion revenue and VND1, 072 billion of profit after tax Average of sale per day is approximately VND70 billion MWG accounted for 620 shops selling mobile phone, computer and consumer electronics, coverage of nationwide In 2016, MWG’s strategy in set the foot print in North of VN market In digital sector (mobile phone and media tablets), The Gioi Di Dong is leading brand and with FPT shop, took over 50% market share of Vietnam retail market

1.3 Nguyen Kim introduction:

1.3.1 History:

Establishing in 1996, Nguyen Kim Trading Joint Stock Company launched its first store in Ho Chi Minh City offered complementary “door-to-door” delivery and installation service Nguyen Kim established the first modern consumer electronic shopping center (modern trade format) in 2001 and built up strategic partnerships with leading global electronic corporations For years, Nguyen Kim became the leading in consumer electronic market in Ho Chi Minh City, South of Vietnam

In 2007, Nguyen Kim set the foot print in North market with Trang Thi Shopping Center (Hanoi) From 2012, Nguyen Kim expanded coverage over the nationwide with opening consumer electronic shopping centers in Central of VN, Southeast of

VN and Mekong Delta, increasing their store chain up to 21 store over the nationwide,

1 B2B center and 1 E-Commerce

Nguyen Kim has good relationship with partners such as electronic corporations, suppliers, banks and financials These help Nguyen Kim in their activities, bring more and more benefits for customers

1.3.2 Nguyen Kim’s Vision - Mission – Objectives:

Vision:

To be the dominant leader of the retail and shopping center industries in Vietnam

Mission:

- To upgrade the retail market and raise the Vietnamese consumers’ benefits to

be equal to those in developed countries

- To build a flat and open environment to maximize the capability, creativity and long-term career development for all the staff

- To ensure the fast and sustained growth with high return of investment

Objectives: Nguyen Kim’s strategic goals in the next 5-year plan

- To continue developing Nguyen Kim as the leading Vietnamese brand in electronic and digital retailers and achieve the average growth rate of 50%

- To reach50 Nguyen Kim shopping centers across 32 big cities and provinces

- To continue follow the commitment of providing superior services and sales, introducing new and innovative policies to upgrade the consumers benefits to be equal to those in developed countries

after-1.3.3 Nguyen Kim’s Marketing Activities

The majority of Nguyen Kim Marketing Activities are trade marketing, small minority are sponsorship Nguyen Kim has yearly promotion campaigns such as Shopping Season, Golden Week and Big Bang These are almost familiar with customers from many years

Here are Nguyen Kim marketing activities during the year:

Table 1.1 – Nguyen Kim Marketing Activities during the year

(Source: Authors synthesized)

Campaign Content Timeline

Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Month of Loving

Thousands of gifts for buyers every day and special discount events for weekend

1.4 Problem statement and Rationales:

For years, Nguyen Kim built up their modern trade format in consumer electronics retail market, to be pioneer in service that bringing much more benefits for Vietnam consumer It success in building website (e-commerce), B2B channel and apply many service policies such as “free changing after sale in one week” service It also applied ERP system in company’s management and sale, the average growth rate is 58% per year In the period from 2011 to 2013, because of the economic slowdown, Vietnamese tend more saving than spending that creates a more intense competitive environment for Technical Consumer Goods retail market To maintain the business and protect the market share, competitors opened new stores, launched promotion campaigns constantly, price competition increased significantly, especially in the big cities which has saturated environment

Nguyen Kim had difficulties because of their competitor’s expansion Vietnam’s Consumer Confidence Index (CCI) improved gradually after the economic downturn, Technical Consumer Goods in Vietnam has developed in sales volume There was

Nguyen Kim &

- Free participation on nguyenkim.com for all match

in Euro Cup 2012 to win BMW X1 Sdrive 18i and 100 LCD TV 32 inches

Promotion & Caring:

- Discount up to 15%

- VIP Card plus discount up

to 5%

- Double warranty times

- 7 days trial using products

Digital Festival

Discount up to 20% + Best price + Gifts for whom buying mobile and camera

the robust growth of the Telecommunications sector which was strengths of The Gioi

Di Dong The Gioi Di Dong opened average 100 new stores per year and reached to

633 stores in 2015 comparing to 21 stores of Nguyen Kim

In 2014, the first time The Gioi Di Dong surpassed Nguyen Kim in Retail Pacific Top 500 ranking with USD721 million revenue comparing to USD603 million

Asia-of Nguyen Kim In 2015, The Gioi Di Dong announced its revenue is USD1,1 billion comparing to Nguyen Kim USD727 million (predicted) The Gioi Di Dong officially becomes leader in TCG market while Nguyen Kim is backward to the second position Nguyen Kim lost its market share and customer loyalty because of several reasons Fisrtly, in the same year, Central Group Vietnam (Thailand retail’s corporation) acquired 49% stakes of Nguyen Kim This transition somehow affect to Nguyen Kim’s business operations Moreover, the lack of creativity in Nguyen Kim’s marketing activities This make its promotion campaigns did not attract customers as usual As a result, there was decrease in the number of visitors and sales

Therefore, this project aimed to find out specific reasons behind for this problem and worked out some solutions to help Nguyen Kim to take back the leading position

1.5 Project objectives:

- To analyze Nguyen Kim’s Business Activities included Marketing, Market Share and its situation where Nguyen Kim are in from both macro and micro perspectives

- To understand changing in customer behavior and habits and uncover opportunities for Nguyen Kim in the new period

- To identify Nguyen Kim problems by SWOT analysis so to recommend strategic for Nguyen Kim to increase consumer perception, loyalty and attraction through Marketing Promotion campaigns

1.6 Scope and limitation of the project:

There were many factors affecting Nguyen Kim’s business performance such as personnel management, supply chain, finance and so on, within the scope of this project, we only focus on Nguyen Kim integrated marketing and communication activities

Data was collected in this project for the last 3 years only It should have some limitations on time series analysis Because 10 to 15 years data are needed for research analysis to find out mutual rules for economic changes

Qualitative research was carried out for two groups of urban customers living in Hanoi and Ho Chi Minh City Therefore, they can’t be representative for the whole

of Vietnam Further research should be accounted for some other cities and rural areas

1.7 Methodology:

The project has been done based on two main data analysis: Secondary data and primary data as follows:

Secondary data came from two sources: (1) Nguyen Kim internal sales and

marketing reports (Year: 2013 – 2015), retail market research reports from GFK, Nielsen, A.T Kearney, CBRE’s report, yearly retail market report from Ministry of Trade, VCCI … on the purpose of macro and micro market analysis (2) Academic papers from Emerald and ProQuest for literature review

Primary data was collected from two full Focus Groups of 10 consumers in order to

understand the consumer insight and expected attributes of electronics supermarkets

in general and Nguyen Kim in particular One group includes consumers who have bought technical consumer goods from electronics supermarkets within one month in

Ho Chi Minh City and another group in Hanoi (refer to table 2-1) The authors acted

as a moderator/facilitator in group discussions Each focus group was held in the private room of coffee house and lasted for two hours During discussion, the respondents were stimulated to digger the topic and go to the right direction of research objectives The contents of discussion aimed to find out the consumer perception on the importance of electronics supermarkets’ attributes on store loyalty

as well as evaluation on Nguyen Kim’s integrated communication and marketing activities (The detailed discussion was referred to Appendix A)

Table 1.2 – Focus Group Respondent description and coding

1.8 Structure of the project:

The paper was organized with 4 chapters:

CHAPER 1 – INTRODUCTION: to introduce the background of Vietnam Retail

Market, especially in Technical Consumer Goods retail market, what Nguyen Kim Marketing Activities in year and then to understand the problem statement and rationale

CHAPTER 2 – LITERATURE REVIEW: as the whole project is about increase

consumer perception, loyalty and attraction through Marketing Implementation

CHAPTER 3 – CRITICAL ANALYSIS including:

1 General analysis: using SPEPT as a tool to prove the potentiality of Vietnam retail industry of which many desk researches is taken into account

2 Micro environment:

2.1 Competitor analysis: To identify Nguyen Kim key competitors in Technical Consumer Goods market Who are they, What are their market positions, strengths and weakness? Material for analysis is synthesized from authors 2.2 Customer segmentation: To understand customer behavior and habits, changing in their lifestyles The main objective of this study is to identify what Nguyen Kim should do to reach their target customer

2.3 Supplier analysis: this chapter will cover the analysis of relationship between Nguyen Kim and suppliers which have great influences on the development’ Nguyen Kim business: Consumer Electronic Producers Understanding their power towards us helps launching marketing campaigns and bringing benefits for customers

2.4 SWOT analysis: as a conclusion for the chapter, identifying Nguyen Kim strengths and opportunities as well as weaknesses and threats as they are overcome to get back leader in the market

CHAPTER 4 – RECOMMENDATION STRATEGY and ACTION PLAN: this

chapter defines Nguyen Kim brand personality and social image, how Nguyen Kim increase their sale and customer awareness without open new stores

CHAPTER 2: LITERATURE REVIEW

2.1 Introduction:

The literature review that was undertaken served to provide a theoretical base in order

to develop and justify the project initiatives The following objectives were addressed through the review as follows:

- To understand the brand nature and scope

- To describe retailer format and retailer brand/store image

- To identify the various dimensions of store image and the role of store image

on store satisfaction and store loyalty

An overview of literature highlighting some new dimensions of store image in a broad point of views was done to better understand the concept The importance of store image in shoppers’ satisfaction level and the store loyalty was mentioned accordingly

in order to help the retail management to have profound understanding of consumer insight, to build unique attributes for their store images to attract more target customers, increase repeat patronage, create more recommendations from loyalty customers and eventually enhance and optimize their business effectiveness This also enable the management to re-position their store image, to set key business objectives by developing an attractive loyalty program and loyalty customers’ recommendations to avoid switching since loyalty customers are active ambassadors for their business More importantly, with the perception of the variation of personal culture orientations, new entrants in retail market will avoid serious mistakes in their business planning

2.2 Brand nature and scope

an “intangible but critical component of what a firm means; a set of promises” (Davis, 2002) As different people may have different perceptions of the same brand, therefore, a brand can be defined as a collection of many meanings They play the roles of identification to allow consumers to clearly see the brand; practicality in

saving time and energy; a guarantee of product or service quality; optimization in assuring the best buy within a category; characterization in being the confirmation of your self-image; continuity in satisfaction with familiarity and intimacy; hedonistic

in satisfaction linked to brand attractiveness; and finally, an ethical function in satisfaction linked to a responsible behavior Based on individual consumer perception, a brand may have one or more of these functions

2.2.2 Scope of the brand:

A brand can be a physical product such as a detergent-Tide or OMO; a service such

as an airline - Vietnam Airlines; a store or distributor-Coop or Big C; a person - Le Tham Duong; a place - Saigon zoo; a sport organization - Vietnam football association; an organization - Vietnam heart association; and even an animal So brand of the store could see as store image

Therefore, brand scope includes Product/Service brand, Retailer brand, Destinations brand, NGOs, Sports Club, Political Parties, Religious organization , ex Church of England, Personal brand : ex Pop stars (My Tam singer), Invention or right (abortion or free trade)

In this project, Nguyen Kim was considered as a retailer brand

2.3 Retailer format:

Consumers can now purchase goods and services from retailers through stores, form retailers not through stores, and retail organizations (Philip Kotler& Keller, 2013) (See Appendix B)

In Vietnam, as decided by the Minister of Trade No 1371/2004 / QD-BTM dated 09/24/2004 promulgating regulations on supermarkets and commercial centers were defined and classified into generalized supermarkets and specialized supermarkets Supermarkets are modern retail formats, or specialized integrated business enterprise; structure of product categories, variety, quality assurance; meet the standards of business space, technical equipment and management skills, business organization; with the civilized modes of service, convenience to satisfy the shopping needs of customers goods Two types of store are identified: Department store and Supermarket Supermarkets are classified in to Generalized Supermarket and Specialized Supermarket Nguyen Kim belongs to Specialized Supermarket

2.4 Store image:

2.4.1 Some definitions:

Martineau (1958, p.47) first defined store image as “ the way in which the store is

defined in the shopper’s mind, partly by its functional qualities and partly by an aura

of psychological attributes”

Lindquist (1974-1975, p.31) stated that store image is “ complex by nature and

consists of a combination of tangible or functional factors and intangible or psychological factors that a consumer perceive to be present” James et al (1976, p.25) simply defined store image as “… a set of attitudes based upon evaluation of those store attributes deemed important by consumers”

Other scholars (Bloemer & De Ruyter, 1998; Faircloth, Capella & Alford, 2001; Jin & Kim, 2003; Osman, 1993) mutually agree that store image is the consumer’s

perception of a store, based on a set of salient attributes

Beristain and Zorrilla (2011) included social and strategic corporate dimensions in

measuring store image Stores can also be perceived as firms, linking the store to aspects such as the firm’s interest in and commitment to society, creating social image Beristain and Zorrilla (2011), re-conceptualized store image as a set of brand associations of commercial, social and strategic nature linked to store Besides, based

on the emotions the store produces on consumers, store personality is formed

2.4.2 Store image dimension:

From prism of recent researchers, the dimensions of store image were not only refered

to commercial/marketing attributes but also social and strategic image Furthermore, the emotion that was created by the store for shoppers, store personality was formed

2.4.2.1 Commercial/marketing image of store:

Martineau' (1958) had identified 4 core attributes: layout and architecture; symbols

and color; advertising; and sales personnel

Lindquist (1974-75) had do the reviewed 26previous studies and surveyed the

opinions of famous scholars and summarized some major constituents It include: merchandise, service, clientele, physical facilities, convenience and promotion, store atmosphere, institutional and post – transaction satisfaction

- Merchandise including factors such as quality, assortment, styling or fashion,

guarantees and price;

- Service encompassing staff service, ease of return, credit and delivery service;

- Clientele: consisting of social class appeal, self-image congruency and store

personnel

- Physical facility: layout and architecture;

- Convenience: primarily location related;

- Promotion: including sales promotions, product displays, advertising

programs, symbols and colors;

- Store atmosphere: defined as “’atmosphere congeniality'' which represents a

customer's feeling of warmth, acceptance or ease;

- Institutional factor: such as the conservative or modern projection of store,

reputation and reliability

- Post-transaction satisfaction: seen as returns and adjustments

James et al (1976) shortened to only six components of the shop: The layout of

goods, personnel, space, service, quality and price

It is mutually agreed by academicians that the commercial/marketing image of store includes:

Merchandise: include subcomponents such as quality, price, fashion and style, the

diversity of species

Promotion: The promotion attributes include: Advertising, display and sales

discounts

Convenience: Includes: stitching charges, inspection before leaving the counter

(Check out), position location, parking, travel, shopping ease, store hour, transportation The convenience is an important part of today's society

Facilities: Includes front deposit (fixtures), other utilities, store appearance, the

layout of the shop (layout) Utilities in the shop contribute to the distinctiveness of the shop there with competitors

Service: is extremely important element of the brand It is the interaction between

customers and employees, including sales staff responsible for keeping interactions with customers

Personnel: includes the style elements of the staff, the ability to communicate &

handling situations

Store atmosphere: including architectural design, smell, sound, shop space The

aesthetics of the store can improve the assessment of consumers on product quality (Richardson et al, 1996)

2.4.2.2 Social image of the store

Social image of the store is described by CSR activities (Corporate social responsibility) According to Carroll’s CSR pyramid (1991), there are four types in order including economic, legal, ethical and philanthropic responsibilities But the consumer most concern on ethical and philanthropic (Garcia de los Salmons et al, 2005)

- Economic responsibility: how the firm extracts part of profit and contribute to

society

- Legal responsibility: the firm should run business legally ,

- Ethical responsibility : the firm should run in the field that contribute to society

- Philanthropic responsibility: the firm treats the consumer and internal staff

with kindness and generosity

2.4.2.3 Strategic image of the store

Strategic image of the store was implicated by 4 factors: innovation, the firm’s future, the organization’s experience (as a sign of competence and safety), firm’s adaptation

to local culture (Aaker, 1996)

2.4.2.4 Store personality

Store personality should be the complement for store image First of all, Martineau (1958) had defined the factor of store personality including layout and architecture, symbols and colors, advertising, and sales personnel Store personality implied the mental trait that similar with human trait The difference between store image and store personality was nearly same as the difference between brand image and brand personality

Because as the mental trait, Alain d’Astous and Melanie Levesque (2003) defined store personality have 5 sub-dimensions: Sophistication, solidity, genuineness, enthusiasm, and unpleasantness These five dimensions were developed from the model famous brand personality of J Aaker (1997) that consisted of (1) Sincerity: Honest, cheerful, wholesome and down-to-earth; (2) Excitement: daring, spirited, imaginative and up-to-date; (3) Competence: reliable, intelligent and successful; (4) Sotistication: charming and upper class; (5) ruggedness: outdoorsy, tough

Recently, by investigating department store consumers, Das et al (2012b) have developed scales for store personality including five components: Sophistication, vibrancy, reliability, authenticity and empathy

2.5 Store Satisfaction

Satisfaction has often been regarded as an antecedent of store loyalty (Bitner, 1990) Store satisfaction can be defined as the outcome of the subjective evaluation that the chosen alternatives (the store) meets or exceeds expectations This definition is within the tradition of conceptualizations of satisfaction that are used in the product literature The basis for the definition forms the disconfirmation paradigm (Oliver, 1996) According to this paradigm, satisfaction is believed to occur through a matching of expectations and perceived performance In case, a consumer makes this comparison, he or she elaborates on the evaluation of a store In order to do so, a consumer must both have the motivation and the ability to evaluate the store relative

to the reference point employed (Petty et al, 1983)

2.6 Store loyalty

Customer loyalty is considered as an important key to organizational success and profitability Loyalty has over the past decade become a crucial construct in marketing, and particularly in the burgeoning field of customer relationship

management (Ball et al., 2004; Soderlund, 2006) Customer loyalty can be classified into brand loyalty, vendor loyalty, service loyalty, and store loyalty (Dick and Basu 1994)

Firstly, loyalty was researched on individual brand and understood as behavioral concept by Brown (1952-1953) Researchers focused on observing and measuring the continuation of purchases in the past Kuehn (1962) considered brand loyalty as a function of purchasing history of customers Lipstein (1959) stated that brand loyalty was a function of probability of purchase of the same product or a function of time for a specific brand According to Jacoby and Chestnut (1978) loyalty is a biased behavioral reaction of consumers in the choice of one among many alternatives in a period of time and it can be represented as a function of decision-making process However, another tendency of attitudinal definition argues that store loyalty is store preference or psychological commitment and more particularly, favorable attitude to the specified store and operationally it can be measured future probability of purchase (Oh, 1995) By this definition, we can know the process of psychological formation

of store loyalty but favorable attitude to specific store is not certainly converted to real action to buy Therefore, the marketing practitioners will have little practical value if they define store loyalty in attitudinal approach

Dick and Basu (1994) have developed a framework for customer loyalty that combines both attitudinal and behavioral measures Loyalty is determined by a combination of repeat purchase levels and relative attitude The framework illustrates the loyalty conditions in which, loyalty, with its high repeat patronage and high relative attitude, would be obviously be an ultimate goal for marketers This definition

is very desirable since either favorable attitude or repetitive purchase alone cannot be necessary and sufficient conditions of index of store loyalty and both must be considered together in the light of consumers

2.7 The relationship between store image, store satisfaction, and store loyalty

Customers’ patronage behavior towards a particular store is dependent on their image

of that particular store (Osman, 1993) The more favorable the store image, the higher the valence of the store to the customer The store image perception is directly related

to store loyalty, but rather an indirect positive effect on store loyalty through consumer satisfaction (Store satisfaction acts as a mediator) (Bloemer and Ruyter, 1998) If retailers manage the perception of store image, they can isolate consumers from their competitors by building store loyalty (Osman, 1993)

The relationship between store image and store loyalty has been studied through two directions The first view is that store image attributes directly influences store loyalty The other is that store image itself affects store loyalty Matineau (1958) also argues that store image has an influence on store loyalty The first direction was considered to examine the influence of marketing/commercial image of store on loyalty whereas, the second can explore the relationship between social, strategic

image or store personality and loyalty Singson (1975) focused on the store image attributes and finds that price and quality are the most important store image attributes affecting store loyalty and assortment follows them, whereas, Lessig (1973) finds that the store image measured by store atmosphere, product, price and promotion is correlated with store loyalty

Additionally, Jones et al (2007) indicated that socially responsible behaviour could bring considerable benefits for store to enhance the store’s reputation Most of researchers mutually agree that the perception of socially responsible behaviour can play an important role in corporate outcomes, including reputation, brand commitment, differentiation, purchase intent and customer identification with a company (Brown and Dancing, 1997; Turban and Greening, 1996; Lichtenstein et al, 2004; Mohr and Webb, 2005) These are key antecedent variables for loyalty Furthermore, by applying the brand personality scales built by Aaker (1997), Zentes

et al (2008) demonstrated that the dimensions of brand personality of retailers directly influence on the store loyalty of consumers

2.9 Marketing strategy:

Philip Kotler said that: “The marketing strategy is the way in which the marketing function organizes its activities to achieve a profitable growth in sales at a marketing mix level”

The Marketing Mix, as part of the Marketing strategy, is the set of controllable, tactical marketing tools that a company uses to produce a desired response from its target market

2.10 Chapter summary

In conclusion, store image is a very important construct in retail marketing From new point of views, store image consists of four main dimensions: Commercial, social, strategic image and store personality Each dimensions also includes sub-dimensions (ie Commercial image includes merchandise, service, promotion, personnel, convenience …) All of these are confirmed to be positively and directly related to store loyalty and indirectly through a mediator, shoppers’ satisfaction Consequently, the research/project framework was described as follows (See figure 2-1):